Homeowners and the aftermath of nature’s fury

It has been over a month now since Hurricane Sandy pummelled the coastal areas of the north-eastern United States. Damage assessments have been staggering: the hard-hit state of New Jersey experienced $36.8 billion in damage. In New York state there was over $9.7 billion in damage just to the housing stock alone.

The headaches will be long-term and catastrophic for many homeowners who survived the storm.

If you own a house, you know the importance of purchasing basic homeowner’s insurance, but have you ever considered that you might need flood insurance as well?

Flood insurance is optional unless you live in a designated flood zone and your mortgage company requires you to purchase federal flood insurance (I experienced this at my former house). But if you own your home outright, or do not live in a flood zone, you are not required to have flood insurance. It is purely voluntary. And most people don’t think they need it.

Case in point:

Many homeowners who lived high up on the western hillside of Colorado Springs, Colorado never dreamed they would need flood insurance. Why would you if you lived at a high elevation, away from all the low-lying creeks and riverbed areas?

Then last summer the Waldo Canyon Fire struck, burning large swaths of entire neighborhoods to the ground. Over 300 families lost their homes – it was the most destructive wildfire in Colorado history.

image from: thedenverpost.com (Helen H. Richardson)

But the hardships didn’t end there. The massive burn-scar on the west side of Colorado Springs now looks like a charred moon-scape. There is little to no vegetation left to absorb moisture. In fact, the whole composition of the soil and the landscape has changed, creating new pathways for water to get down the mountainside.

Suddenly new storm spillways developed and people who had always been high and dry in the past were at risk of imminent flooding – even with a moderate amount of rainfall. This is a problem that experts say will plague the region for years to come.

Downhill a little further, right in the city of Colorado Springs, residential areas not previously considered at risk have become prone to flooding from the burn-scar runoff. Subsequently, government designated flood-zones are being expanded. Now there are many people on the west-side of Colorado Springs scrambling to get flood insurance.

Likewise, residents of the New Jersey coast always knew they were are risk. People further inland however, may never have thought it possible to be victims of a massive storm surge and the resulting floods. Hurricane Sandy proved that we should never become complacent about the power of nature and its capacity for destruction.

According to Politicker NJ, over 30,000 businesses and homes in New Jersey were destroyed or structurally damaged while 42,000 additional homes were also impacted with minor damage. And those were not just on the coast. Homes miles inland experienced damage from falling tree limbs and high winds, not to mention localized flooding.

People who were not in a designated flood zone – people who thought they were safe from flooding and thus didn’t have flood insurance – are facing an uncertain and expensive future.

I have been seeing a lot of articles lately about homeowners in the storm area who had no idea that a standard home-owners policy does not cover flooding, and thus they did not have proper coverage.

Even many people who had flood insurance were surprised to find out that it did not cover everything.

Here’s what I have taken from all this: even if you *think* you don’t live close enough to water to purchase flood insurance, it might be wise to look into it anyway. It is not cheap – I can tell you that from personal experience. But what is the cost of peace-of-mind? At the very least, it is a good idea to make sure you know exactly what your homeowner’s insurance policy does and does not cover.

For my next home purchase (being the serial home-purchaser that I am), we are definitely factoring catastrophe insurance into the costs.